December 2008
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This paper explores the likely impact of different estimation methods in key components of hydro-economic models such as hydrology and economic costs or benefits, using the CALVIN hydro-economic optimization for water supply in California. In perform our analysis using two climate scenarios: historical and warm-dry. The components compared were perturbed hydrology using six versus eighteen basins, highly-elastic urban water demands, and different valuation of agricultural water scarcity. Results indicate that large scale hydroeconomic hydro-economic models are often rather robust to a variety of estimation methods of ancillary models and components. Increasing the level of detail in the hydrologic representation of this system might not greatly affect overall estimates of climate and its effects and adaptations for California's water supply. More price responsive urban water demands will have a limited role in allocating water optimally among competing uses. Different estimation methods for the economic value of water and scarcity in agriculture may influence economically optimal water allocation; however land conversion patterns may have a stronger influence in this allocation. Overall optimization results of large-scale hydro-economic models remain useful for a wide range of assumptions in eliciting promising water management alternatives.